What is a Jumbo Loan?
It is a non-conventional loan that major agencies, such as FHLMC and FNMA, won’t buy and trade because of the loan’s cost. These two major institutions are very powerful in the mortgage market, and most lenders want to be able to sell mortgage obligations to them to earn liquidity to do more business. Since a jumbo loan fails to qualify for Fannie Mae and Freddie Mac guidelines, borrowers must often pay extra to help lenders countenance the extra risk they encounter for financing it. Typically, rates for a jumbo loan can be half a percentage point higher than rates for standard conventional loans. Jumbo loans were designed to help high-income individuals afford luxury homes or smaller homes in highly desirable areas. However, thanks to a major inflation in the housing market over the past few years, more and more middle-income Americans have had to turn to jumbo loan financing to get into their dream homes. Many jumbo loan borrowers end up incurring additional costs during refinancing.
The housing bubble that has been driving up prices across the country has left house buyers looking for alternative ways to finance their dream home. Unfortunately, many starter homes in certain areas of the country have prices that leave buyers in sticker shock. Many of these buyers find that jumbo loans are the only way they can finance a new home. A jumbo loan, also known as a non-conforming loan, is a residential or commercial mortgage loan that does not conform to the guidelines set by Fannie Mae (the Federal National Mortgage Association) or Freddie Mac (the Federal Home Loan Mortgage Corporation). Basically, it is a loan that exceeds the limit and guidelines that Fannie Mae or Freddie Mac require for loans they are willing to purchase from mortgage originators. The new conforming loan limits are set every January, and the amounts for a jumbo loan are determined based on those limits. Effective January 1st, 2006, the conforming loan limits are as follows: for houses in the contig
In Arizona, any loan amount that is over $417,000 can be considered an Arizona Jumbo Mortgage Loan. There are many different lenders offering jumbo loans – even though the credit crunch may be in full swing, people with good credit and who can document their income can qualify for a jumbo loan. Generally speaking, lenders will have a “high-limit” that jumbo mortgages can go to – but you will generally find that it will vary from lender to lender. If you call 5 different lenders, you will generally hear 5 different maximum loan amounts. Generally speaking, we have found that the average maximum loan amount is about $2,000,000.
